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India Won’t Be Immune To U.S., China Trade Blows

One of the big immediate risks of the U.S.-China trade war for India and a number of other countries may be “trade diversion”.

That means products and merchandise, hit with retaliatory or counter-retaliatory tariffs by the U.S. and China respectively, will get diverted or even dumped on markets like India, Raj Bhala, Professor at Kansas University told BloombergQuint in an interview. “So the likes of India and Canada have already started to consider the trade defence instruments they might use against this prospect,” he added.

The longer-term impact may be recessionary, Bhala warned. “There is the possibility of a recession, or a drop in jobs, incomes or retaliation by other countries or defence of protectionism by other countries and then you get an area of deflation and possibly recession.”

The trade dispute between the U.S. and China has entered a new phase with the Trump administration announcing higher tariffs on $34 billion of Chinese imports, and an equivalent response from Beijing. Without talks, in the next two weeks or so, the U.S. will announce a further $16 billion of goods to be hit with higher duties, and China is expected to retaliate.

To with the impact on India will be marginal, according to Ajay Dua, former Secretary in the Ministry of Industry and Commerce. But Asia’s third-largest economy won’t be able to escalate the collateral damage as the conflict escalates, he warned.

Right now we may not be worried about it but we can’t keep ourselves totally immune from it.